According to the school of ethical universalism

199Chapter 9 Strategy, Ethics, and Social Responsibility 199

Copyright © 2020 by Arthur A. Thompson. All rights reserved. Reproduction and distribution of the contents are expressly prohibited without the author’s written permission

Strategy: Core Concepts and Analytical Approaches

An e-book published by McGraw-Hill Education

Arthur A. Thompson, The University of Alabama 6th Edition, 2020-2021

199

chapter 9 Strategy, Ethics, and Social Responsibility

Corporations are economic entities, to be sure, but they are also social institutions that must justify their existence by their overall contribution to society. —Henry Mintzberg, Robert Simons, and Kunal Basu, professors

We don’t think of ourselves as do-gooders or altruists. It’s just that somehow we’re trying our best to be run with some sense of moral compass…... —Craig Newmark, Founder of Craigslist

The time is always right to do what is right. —Martin Luther King, Jr., Civil rights activist and humanitarian

It takes many good deeds to build a good reputation and only one bad one to lose it. —Benjamin Franklin

But I’d shut my eyes in the sentry box so I didn’t see nothing wrong. —Rudyard Kipling

Clearly, in capitalistic or market economies, top-level managers of privately-owned companies are responsible and accountable for operating the enterprise profitably and acting in shareholders’ best interests; management’s fiduciary duty to operate the enterprise in a manner that creates value for shareholders is not a matter for serious debate. Just as clearly, a company and its personnel are duty-bound to obey the law and comply with governmental regulations. But does a company also have a duty to go beyond legal requirements and hold all company personnel responsible for conforming to high ethical standards? Does a company have an obligation to be a good corporate citizen? Should a company display a social conscience by devoting a portion of its resources to improving the quality of life in the communities where it operates and in society at large? How far should a company go in protecting the environment, conserving natural resources for use by future generations, and ensuring its operations do not ultimately endanger the planet?

This chapter focuses on whether a company, in the course of trying to craft and execute a strategy that delivers value to both customers and shareholders, also has a duty to (1) act in an ethical manner, (2) be a committed

Chapter 9 • Strategy, Ethics, and Social Responsibility 200

Copyright © 2020 by Arthur A. Thompson. All rights reserved. Reproduction and distribution of the contents are expressly prohibited without the author’s written permission

corporate citizen and allocate some of its financial and human resources to improving the well-being of employees, the communities in which it operates, and society as a whole, and (3) screen its strategic initiatives and operating practices for possible negative effects on the environment and future generations of the world’s population.

What Do We Mean by Business Ethics?

Ethics concerns the principles and standards of right and wrong conduct. Business ethics concerns the application of ethical principles and standards to the actions and decisions of business organizations and the conduct of their personnel.1 Ethical principles in business are not materially different from ethical principles in general. Why? Because business actions must be judged in the context of society’s standards of what is ethically right and wrong, not by a special set of rules that apply just to business conduct. If dishonesty is considered unethical and immoral, then dishonest behavior in business—whether it relates to customers, suppliers, employees or shareholders— qualifies as equally unethical and immoral. If being ethical entails not deliberately harming others, then businesses are ethically obligated to recall a defective or unsafe product, regardless of the cost. If society deems bribery unethical, then it is unethical for company personnel to make payoffs to government officials to win government contracts or bestow gifts and other favors on prospective customers to win or retain their business. In short, ethical behavior in business situations requires adhering to generally accepted norms about right and wrong. This means that company managers should be expected to craft a strategy that complies with ethical standards and strive to ensure that ethical norms are observed in executing the strategy. And it means all company personnel have an obligation— indeed, a duty—to conduct their assigned piece of the company’s business in an ethical and honorable manner.